Could you please provide additional information on the error you get? The steps you describe seem correct.
The first step of the ones you describe leads me to the idea that you create ASP.NET Web Site (please correct me if I am wrong). Please try creating an ASP.NET Ajax-Enabled Web Site. By doing so, your config file will have all the necessary httpHandlers and httpModules. Please review this article
for additional information(check the topic called Adding ASP.NET AJAX Configuration Elements to an Existing Web Site
the Telerik team